Nortel: Reverse Split Tomorrow; Will Shares Sell Off?

By Eric Savitz

Tomorrow, Nortel Networks (NT) will effect a 1-for-10 reverse stock split, as announced on November 7. In theory, this really shouldn’t matter to the performance of the stock. And yet, maybe it will. In a research note this morning, RBC Capital’s Mark Sue notes that an analysis of recent companies who have completed a reverse split found the stocks fall on average by 8% in the first week after the reverse split.

Meanwhile, RBC’s Sue maintains a Sector Perform rating on Nortel shares.”Considering the consolidation in the industry and increased competitive-pressures, we believe Nortel may remain in rebuilding-mode for the next several years,” he wrote today. “In terms of business fundamentals, we believe it will take time to stabilize the business, increase market sharem, reduce costs and ramp new products.”

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.